Credit Suisse yesterday revised upwards its GDP growth forecast for Taiwan’s economy for this year to 6.7 percent from its previous estimate of 4.8 percent in December and expected the economy to expand by 4.5 percent next year.
The move came after the Directorate-General of Budget, Accounting and Statistics said on Thursday that Taiwan’s economy grew 13.27 percent in the first quarter and raised its GDP growth estimate for this year to 6.14 percent.
“Domestic demand momentum does look better than we thought and we are upgrading our 2010 GDP growth forecast from 4.8 percent to 6.7 percent,” Credit Suisse said in a report, adding that the economy would continue to expand in the following quarters.
Credit Suisse’s estimate was higher than that of most of its counterparts in Taiwan except for Citigroup Taiwan Inc, which made a preliminary forecast for Taiwan’s GDP growth for this year of 7.2 percent earlier this month.
Taken aback by Taiwan’s first-quarter robust economic growth compared with market expectations of 11 percent, Credit Suisse attributed its upward adjustment to the better-than-expected recovery in inventories.
“Most of Taiwan’s components were roughly in line with our expectations. The divergence was the rebound in inventories, which contributed 5.1 percent year-on-year in the first quarter after four quarters of contraction,” the report said.
“This, along with the sharp rise in investment, points to local corporations regaining confidence and this momentum is likely to persist for a few quarters more,” it said.
Credit Suisse said although the risk of a wider fallout from the debt troubles in Europe cast a pall over market expectations, Taiwan would at least see better-than-expected growth momentum through the next two or three quarters.
In addition, the Swiss bank forecast that the nation’s rediscount rate would be raised to 1.5 percent by the end of this year and that consumer prices are likely to rise 2.5 percent by the end of next year.
Credit Suisse, however, said that Taiwan’s economy would face numerous potential risks next year such as high unemployment and the eurozone credit crisis that has caused the global financial markets to tumble.
“The government has revised up its 2010 GDP growth forecast to 6.1 percent, citing optimism over global recovery and its boost to private investments. However, the unemployment rate remained elevated at 5.6 percent in March,” the bank said.
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